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The State of the Monetarist Debate by LEONALL C. ANDERSEN The following paper was presented last spring as part of a series of public lectures held at the fol- lowing universities: The Ohio State University; University of California at Los Angeles; and University of Southern California, As indicated by the title, the purpose of the paper is to discuss those issues which appear to have divided into two camps: monetarist and post-Keynesian. To further this objective, two discussants of opposing viewpoints were invited to comment on the Andersen presentation. Professor Lawrence R. Klein of the Wharton School of Finance, University of Pennsylvania, provides comments from a post-Keynesian point of view. Professor Karl Brunner of the University of Rochester dis- cusses the issues from a nwnetarist position.

FOR OVER thirty-five years there has been con- made in reconciling these views up to the present tinuing debate between two prominent schools of eco- time. nomic thought. In recent years these two schools have I want to point out that my analysis of these topics been characterized by the labels “monetarist” and is from the point of view of an active participant on “post-Keynesian” . Some major participants the monctarist side of the debate. The analysis re- on the monetarist side are professors Karl Brunner, flects my view of the debate and may not agree, in all

Milton Friedman, and Allan Meltzer. The post-Key- aspects, with the views of other participants — mone- nesian side is represented by such academic econo- tarists or post-Keynesians. In addition, for purposes of mists as Lawrence Klein, , Paul this discussion, I will contrast two polar positions. It Samuelson, and . must be recognized, however, that there are many The debate has been ongoing since the publication who consider themselves to be in some middle-of-the- road position on many of the issues. of Keynes’ General Theory in the mid-1930s. It be- came particularly heated in the late 1940s, and in the 1950s post-Keynesian views dominated macro-eco- THE IMPACT OF nomic theory and economic stabilization policy. The A Post-Keynesian View debate was reopened in the late lD5Os, and beginning in the mid-1960s the monetarist view began to be Let us now examine the first issue — the role of money as an important driving force in the economy. recognized as a serious challenge to post-Keynesian Paul Samnelson, in commenting on the debate, has economics. provided an excellent summary of the post-Keynesian 1 The debate has ranged over three major fields of vie%v regarding money. interest to economists. These are macro-economic As a limit upon the stimulus stemming from money theory, economic stabilization policy, and economic creation by orthodox open-market operations, must research methodology. My remarks today will concen- be reckoned the fact that as the pumps new money into the system, it is in return taking trate primarily on the stabilization aspects of the from the system an almost equal quantum of money debate, although I will of necessity bring in some substitutes in the form of government securities. discussion of the other two. What needs to be stressed is the fact that one can- For purposes of this discussion, I will focus on six not expect money created by this process alone ..- to have at all the same functional relationship to the topics of the economic stabilization aspect of the de- level of the CNP and of the price index as could be bate. These are: the impact of monetary actions, the the case for money created by gold mining or money impact of fiscal actions, the trade-off between infla- created by the printing press of national govern- ments or the Fed and used to finance public expen- tion and , the factors influencing inter- 2 est rates, the degree of stability inherent in thc ditures in excess of tax receipts. economy, and the appropriate time horizon for stabili- iPaul A. Samuelson, “Reflections on the Merits and Demerits zation policy- In discussing each of these topics, I of ,” in Issues in Fiscal and : The Eclectic Views the Controversy, ed. James J. Dia- will first summarize the contending views in the last mond (DePauI University, 1971), pp. 7-21. half of the 1960s. Then, I will summarize the progress 2Thid,, pp. 8-9.

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Samuelson continues this analysis by pointing out run movements in output are little influenced by that in today’s economy does not changes in the growth rate of money. Trend move- necessarily reflect creation of wealth, and thereby ments in output are essentially determined by the exerts no direct influence on . Cre- growth of such factors as the labor force, natural ation of money, however, does change interest rates resources, capital stock, and technology. In the short which in turn influence aggregate demand. He then run, however, changes in the trend growth of money points out that research of the late 1930s and 1940s or pronounced variations around a given trend exert led economists to reject money because interest rates a significant, but temporary, impact on output. The were found to exert little influence on aggregate timing and magnitude of such impact depends on demand. initial conditions at the time of a change in money growth. Two major indicators of initial conditions are Samuelson then presents his view of recent eco- the level of resource utilization and the expected rate nomic history by stating that Pigou’s real balance of . effect of money on consumption served to reconcile the deep cleavage between neo-classical theory and Monetarists do not maintain, as asserted by many the . He then contends that post-Keynesians, that money is the only influence on

-..by the 1950’s and 1960’s an accumulating body either nominal or real economic magnitudes. Other of analysis and data had led to a strong belief that factors which exert a significant influence are factors open-market and discount operations by the central which change the , productivity, bank could have pronounced macroeconomic effects and factor endowment. There is even room in this upon investment and consumption spending in the 3 succeeding several months and quarters. analysis for Keynes’ “animal spirits” on the part of businessmen. The key proposition is that changes in Despite this strong contention regarding the influ- money dominate other short-run influences on output ence of monetary actions, post-Keynesian analysis, and other long-run influences on the and until recently, has persisted in denigrating the influ- nominal aggregate demand. I will have more to say ence of money because of the rather weak, or long later in this regard. delayed, response of aggregate demand to changes in interest rates. Econometric models continued to stress Recent Developments in the Debate the channel and shied away from in- corporating any influence of real money balances. For An integral part of the debate regarding the influ- example, when simulations of the original Klein- ence of money on economic activity is the different Goldberger model of the late 195Os showed that the views held regarding the economic function of money. real balance effect swamped all other influences, the Some who denigrate the importance of money point monetary sector was dropped from the model because out that it is one asset which carries no monetary such a result was deemed “unrealistic” and yield. Others stress that money in today’s economy is “implausible.”4 not wealth and conclude that changes in money have little direct influence on spending decisions. Some A Monetarist View post-Keynesians view money as only one of a virtually continuing spectrum of financial assets and thus be- Now for the other side of this issue. The mone- lieve it to be of only secondary importance. tarists contend that changes in money exert a strong force on aggregate demand (measured in nominal A further argument advanced about the role of terms), the price level, and output. In determining money has been based upon the lack of synchroniza- the impact of money, it is further contended that a tion between transactors’ receipts and expenditures. distinction must be made between nominal and real In such a case, it is desirable for market participants economic magnitudes and between the short run and to hold an inventory of money balances. This argu- the long run. ment can be used to develop a model which delegates a powerful role for money in influencing economic Changes in the trend growth of money are consid- activity. The post-Keynesians, however, have not pro- ered the dominant, not the exclusive, determinant of duced such a model. the trend of nominal GNP and the price level, Long- On the other side of the debate, empirical evidence ~Thid,,p. 12. 4 has been presented to support the view that money Arthur S. Goldberger, Impact Multipliers and Dynamic Prop- erties of the Klein-Goldberger Model (Amsterdam: North- matters to a considerable degree; but, until recently, Holland Publishing Company, 1959), pp. 84-85. little attention has been given to producing a rigorous

Page 3 FEDERAL RESERVE BANK OF ST. LOUIS SEPTEMBER 1973 analysis of the role that money plays in a market this recommendation almost exclusively until late in 96 economy. In recent years, the view has been growing the l 0s. that money does have an extremely important influ- Attention has gradually shifted in recent years to- ence because it is the asset used by society which ward more emphasis on money and less on inter- minimizes the economic costs associated with collect- est rates. From 1951 to 1966, the Federal Open ing market information and conducting market Market Committee stressed only market interest rates transactions. and other measures of money market conditions. From Brunner and Meltzer, using this cost of information 1966 to 1970, money or other monetary aggregates amid transactions argument, have presented an ex- served as a minor constraint on actions regarding tended analysis of the emergence of money in a interest rates. In 1971, interest rates were manipu- market economy. Their view of the role of money is lated in an attempt to produce desired movements the following: in nioney. Finally in 1972, changes in reserves avail- Our analysis extends the theory of exchange to in~ able for private deposits were formally set forth as a elude the cost of acquiring infonnation about market means of controlling money. Such actions, however, arrangements, relative prices, or exchange ratios. In- were constrained to a considerable degree by interest dividuals search for those sequences of transactions, rate considerations. Since 1969 the President’s Council called transaction chains, that minimize the cost of of Economic Advisers has recommended changes in acquiring information and transacting. The use of assets with peculiar technical properties and low money and credit as a better guide for monetary ac- marginal cost of acquiring infonnation reduces these tions than market interest rates. costs. Money is such an asset, and the private and Although the debate regarding money is less acri- social productivity of money are a direct conse- quence of the saving in resources that the use of monious today, some important areas of contention money permits and of the extension of the market remain. A foremost one is in regard to the speed of system that occurs because of the reduction in the response of output, prices, and nominal GNP to a 5 cost of making exchanges. change in money. Monetarist theories and empirical Thus, money as a medium of exchange, as a transac- studies point to a relatively quick, but short-lived, tion dominating asset, results from the opportunities response of output to a change in money growth, with offered by the distribution of incomplete information a longer time period required for prices to respond and the search by potential transactors to develop 6 transaction chains that save resources. fully. Post-Keynesian econometric models, on the other hand, produce an impact of money changes What has been the outcome of the debate thus far only over a much longer period. on the issue of the role of money in economic stabiliza- Many economists now agree with the proposition tion? There is no doubt that money has been assigned of monetarists that the long-run influence of money a more prominent role in recent years, but not to the is only on the price level, with no lasting impact on extent advocated by monetarists. output. Some, however, have distorted the monetarist builders have begun to give greater recognition to vie\v by asserting that monetarists believe that these money. For example, Lawrence Klein has reported long-run propositions also hold in the short run. For that the Wharton model now has a real money bal- ance effect and that now the model predicts better. example, Governor Andrew Brimmer of the Federal Reserve System, in commenting last year on the de- Simulations of the MIT-FRB model, which had bate, concluded that “. ..there really is no difference Franco Modigliani as one of the principal architects, between modern monetarists and modern Keynesians demonstrate the long-run properties of money as with respect to the long—run implications of their stressed by monetarists; namely, changes in money, 7 theory.” But, he then asserts, “Monetarists appear to in the long run, influence mainly the price level. argue that the reactions expected in the long-run can 5 In recent years, money has also received more at- also be expected to hold even in the short-run.” This tention in the conduct of economic stabilization. For is simply incorrect, years, post-Keynesians recommended that market in- Another major point of contention is the nature of terest rates be the strategic variable to he controlled the monetary transmission mechanism. Post-Keyne- in stabilization efforts. Policymakers tended to follow 7 Andrew F. Brimnmer, “Monetarist Criticism and the Conduct ~Karl Brunner and Alan H. Meltzer, “The Uses of Money: of Flexible Monetary Policy in the ” (Paper Money in the Theory of an Exchange Economy,” The presented at the Institute of Economics and Statistics, Oxford American Economic Review (December 1971), p. 804. University, Oxford, England, April 24, 1972), p. 8. Olbid,, p. 793. ~Ibid p. 13.

Page 4 FEDERAL RESERVE BANK OF ST. LOUIS SEPTEMBER 1973 sians have advanced their views of this mechanism cording to Samuelson, money has an important influ- and have built empirical models based on their views, ence only when it is created to finance Government On the other hand, monetarists, until recently, have expenditures, Monetarists contend that Government not developed such empirical models. Brunner and expenditures increase aggregate demand perma- Meltzer have now developed a theoretical model of nently only if they are continually financed by creat- the transmission mechanism, which is based on rela- ing money. Monetarists recognize, however, that Gov- tive price theory, and plan to make empirical tests of ernment spending financed by borrowing can have an its implications. At the Federal Reserve Bank of St. important indirect effect on spending because deficits Louis,we are in the process of spelling out our theory tend to induce central banks to increase money. of the channels by which changes in money influence nominal GNP, the price level, and output. Along with The fiscal aspect of the debate is far from being the theoretical work, we are attempting to estimate resolved. The post-Keynesian view has continued to the parameters of these channels of monetary be the dominant one in both macro-economic theory influence. and in stabilization policy. Monetarists, however, have caused both theorists and model builders once again to take specifically into consideration the financing THE IMPACT OF FISCAL ACTIONS aspects of Government spending. These financing as- Let us now turn our attention to the second issue pects, for the most part, had been dropped from both the role of fiscal actions in economic stabilization. The these endeavors in the early 1950s when the crude generally accepted view is that changes in Federal fiscal analysis came into vogue. Government expenditures and tax rates exert a strong and rapid force on aggregate demand. Most mone- The general rejection of the challenging view has tarists, but not all, contend that the influence of such been mainly the result of its failure to specify the actions is transitory. transmission mechanism whereby crowding-out oc- curs. Economists such as Brunner and Meltzer and Post-Keynesians advance three main arguments for Carl Christ have developed theoretical structures in the primacy of fiscal actions. Increases in Govern- which the Government’s budget constraint plays an ment spending add directly to aggregate demand, and important role. Such structures will he useful in iden- reductions in tax rates increase disposable income, tifying the conditions under which crowding-out oc- thereby increasing aggregate demand. Both of these curs. Monetarists continue to be skeptical regarding actions are held to have a multiplier effect, Govern- the influence of fiscal actions when such influence is ment borrowing adds to wealth which increases measured without due regard given to financing spending. With a constant money stock, higher inter- considerations. est rates result which, in turn, reduce the quantity of money demanded. To the extent that the velocity of One final point. Just as in the case of the role of circulation increases, there is a fiscal impact on aggre- money, the debate over fiscal actions may be largely gate demand. one of timing. Both the MIT-FRB model and the Data Resources model, which are built along post- Monetarists point out empirical evidence that the Keynesian lines, have a zero Government spending Government expenditure multiplier, with a constant multiplier with regard to real output. But this result money stock, is positive for a few quarters, but in the takes a fairly long period of time to accrue. On the long run it is zero. The argument frequently advanced other hand, monetarists generally believe this same in support of such a response is the so-called “crowd- result occurs within a much shorter time interval. ing-out” effect. In the absence of accompanying mone- tary expansion, Government expenditures must be financed by taxes or borrowing from the public. In THE INFLATION-UNEMPLOYMENT either case, command over resources is transferred TRADE-OFF from the private sector to the Government, with the result that there is no net addition to purchases. Only Iamsure you are familiar with the argument that an economy must accept a high unemployment rate in the case of a deficit financed by the monetary sector does Government spending exert more than a in order to have a low rate of inflation, or that a low short-run positive influence on aggregate demand. unemployment rate can only be achieved at the cost of a high rate of inflation. Monetarists, as well as Such a response carries an implication opposite to many other economists, reject this argument, con- that postulated by Samuelson regarding money. Ac- tending that in the long run the “normal” or “natural”

Page 5 FEDERAL RESERVE BANK OF ST. LOUIS SEPTEMBER 1973 unemployment rate will eventually evolve regardless rate) instead of the comparatively less sharp trade- of the rate of inflation. off suggested in earlier empirical studies. With regard to this issue, post-Keynesians have Both sides, however, are in quite general agree- generally relied more on empirical evidence, while ment regarding the desirability of actions to improve proponents of the alternative view have relied more the functioning of our labor and commodity markets. on theoretical arguments. This is an interesting re- Be there no trade-off, a sharp one, or a relatively versal of approaches from those used in the two mild one, it is agreed that less restricted markets previous issues. would tend to reduce the rate of unemployment as- sociated with any given rate of inflation. In simple form, most empirical studies of the in- flation-unemployment trade-off have proceeded in the following manner. The price level is said to be a FACTORS INFLUENCING markup of labor costs, which depend on wage rates MARKET INTEREST RATES and productivity. Wage rate changes, in turn, are The next issue in the debate which I will discuss postulated to be negatively related to the degree of is the one regarding the factors influencing market slack in the labor market, measured by the unemploy- interest rates. This issue has basically revolved around ment rate. Empirical studies have found it possible to the distinction between real and nominal interest measure such relationships; thus, post-Keynesians con- rates. Another important point of difference has been clude that the above mentioned trade-off exists. the market in which interest rates are determined. Monetarists have developed mostly theoretical ar- guments in support of the “no trade-off” proposition. Post-Keynesians have advanced the view that the It is not denied that a short-run trade-off exists, but short-term interest rate is basically determined by the it is denied that such a trade-off exists in the long run. demand for and the supply of money balances in The crucial consideration involves the formation of what they call the “money market.” The short-term rate is then postulated to influence the long-term via price expectations, a variable generally neglected un- a term structure relationship. Finally, there is a re- til recently in post-Keynesian analysis. sponse of interest-sensitive components of aggregate I will not go through this very complicated analysis. demand, followed by an aggregate demand feed- Instead, I will merely point out the conclusion that back on the interest rate. when prices rise at a constant rate, and if the ex- pected rate of price change is the same, the unem- For years, the price level was held constant in a ployment rate will be at its normal rate and will large body of post-Keynesian analyses, with the result remain there until a shock occurs. This normal un- that all variables were in real terms, including interest employment rate is determined by such factors as rates. Monetarists have revived the much earlier view cost of labor market information, labor mobility, job of regarding interest rates. They focus discrimination, and laws and organizations which im- on the nominal rate of interest, which is determined pede the free functioning of the labor market. by factors influencing the real rate of interest, and takes into consideration the expected rate of inflation. This trade-off issue is far from being settled. It is According to this analysis, the real interest rate is quite generally agreed that the crucial consideration determined by a multiplicity of factors traditionally is the manner in which price expectations are formed. summarized in the phrase “productivity and thrift.” No trade-off exists unless price expectations are The nominal interest rate, in equilibrium, is equal to formed in such a manner that in the long run ex- the real interest rate plus the expected rate of pected price changes fully reflect actual price changes. inflation. Empirical evidence presented to date has proven to This analysis has led monetarists to summarize the be inconclusive — there is support for both sides of the debate. factors which influence market interest rates as the liquidity or money effect, the output effect, and the In one respect, some post-Keynesians have moved expected rate of inflation. An increase in the rate of closer, but not completely, to accepting the no trade- money growth first decreases market interest rates, off view. Simulations of several prominent econome- but then output rises in response to the faster money tric models give results which show a very sharp growth. This results in an increase in the demand for trade-off relationship (that is, a large change in infla- credit and interest rates rise. Finally, inflation in- tion, but a very small change in the unemployment creases, and, to the extent that this is reflected in

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expectations of inflation, an inflation premium is in- view that these factors lead necessarily to recurring corporated into market interest rates. fluctuations in output and prices which are of a cycli- cal nature or that there does not exist a self-correction Experience with inflation since the mid-1960s has mechanism. Monetarists contend that our economic led most economists to incorporate price expectations system is such that disturbing forces, including even into their interest rate analysis. Econometric model changes in money growth, are rather rapidly absorbed builders found it necessary to introduce this factor and that output will naturally revert to its long-run because, prior to doing so, their models had forecast growth path following a disturbance. interest rate movements rather badly in the inflation- ary period of the late 1960s. Outside of this change, Little empirical evidence has been produced in sup- however, their interest rate mechanism has remained port of either view. Post-Keynesians offer simulations essentially as outlined earlier. of the response of their models to shocks, while the challengers have appealed more to casual empiricism. A sharp controversy has existed regarding the ap- Moreover, monetarists have not been convinced by prôpriate role of interest rates in monetary policy. post-Keynesian evidence which does not involve hold- The conventional view has stressed interest rates as ing the growth of money constant. the key variable to be manipulated by the central bank in seeking to achieve its stabilization goals. High This issue is also far from being resolved, but one and rising interest rates have been interpreted as in- significant step has been taken toward resolution. dicating monetary restraint. The opposing view in- There is quite general agreement that •the role of sists that the central bank has very imperfect control price expectations is very important. One crucial con- over market interest rates in any period other than a dition necessary to yield monetarists’ results is that very short one, and that a prolonged period of high the current rate of inflation should respond to the and rising rates indicates monetary ease. expected rate of inflation, however the expectation is formed, with a coefficient of one. Even though .some policy advisers, such as the Coun- cil of Economic Advisers and some members of the As in the case of several of the other issues in the Federal Open Market Committee, have accepted the debate, the central point of contention of the inherent view tha.t interest rates contain a price expectations stability issue appears to be a matter of timing. Sev- component, interest rates still play an important role eral econometric models built along post-Keynesian in stabilization policy. In addition, there has been lines show, by simulation experiments, that shocks are almost a complete lack of understanding on the part of absorbed over a fairly long period of time and do not Congress in both regarding the modern view of in- produce cycles. On the other hand, monetarists postu- terest rates and in applying this view to stabilization late a shorter period for adjustment. policy prescriptions. APPROPRIATE TIME HORIZON DEGREE OF INHERENT FOR STABILIZATION POLICY ECONOMIC STABILITY Let us now turn to the final issue — the appropriate

I now turn to the next issue — the dispute regard- time horizon for stabilization policy. Post-Keynesians, ing the monetarist contention that the economy is with their view that the economy is basically unstable, inherently stable. Post-Keynesians contend otherwise. have advocated very active stabilization actions in the Samuelson has summarized a few factors which he short run. Even if a disturbance is absorbed, the time believes affect money GNP even if money is held interval is considered to be so long that economic constant: welfare will be greatly reduced if short-mn stabiliza- tion actions are not taken. Some have expressed the (1) .. .any significant changes in thriftiness and the propensity to consume .. .. (2) .,.an belief that the economy can be turned around on a exogenous burst of investment opportunities or dime; therefore, in the ease of high unemployment, animal spirits. .. stimulus can be applied until inflation rears its ugly The alternative view does not deny that such fac- head and then restraint can be applied to curb infla- tors exert a significant influence on GNP, output, and tion. The term “fine-tuning” has been applied to this view, Since they hold that fiscal actions are powerful the price level. But it does challenge the conventional and have a relatively quick effect, and that changes °Samuelson, “Reflections on the Merits and Demerits of Mone- in money have a very slow effect, the former tool of tarism, p. 7. economic stabilization is preferred.

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Monetarists, on the other hand, prefer a relatively The influence of price expectations on market interest stable growth of money over fairly long intervals of rates is almost universally accepted, and the primacy time. This position is based on the view that changes of interest rates as a tool of economic stabilization has in money exert a strong, short-mn effect on output, been seriously challenged. Although the stable mone- but little influence in the longer run. It is also based tary growth rule has not been generally accepted, on the belief that the economy is inherently stable, there is a quite general acceptance of the proposition thereby requiring no off-setting actions. Furthermore, that money growth should be less variable than in the it is contended that short-run stabilization actions i950s and 1960s. The proposition that inflation is pri- have, in the past, been exercised in such a manner as marily a monetary phenomenon, however, has not to create economic instability, and thereby have re- generally been accepted in stabilization policy. duced economic welfare. Two main developments are desirable if this debate This issue is far from being resolved, if it ever can is to be resolved. The first involves monetarists and be, because it involves one’s notion of economic wel- the second, post-Keynesians. Monetarists must spell fare. It will persist even if there is conclusive evi- out, in greater detail than up to now, the channels dence of a short-run, but short-lived impact of stabili- by which money influences nominal GNP, the price zation actions on output and employment and a level, and output. Lawrence Klein, in commenting on long-run impact on the price level. the Wharton model and the academic version of the MIT-FRB model, has laid down this challenge to the According to , a prominent post- monetarists: Keynesian, Each combines fiscal with monetary analysis; each there is a trade-off between the speed of price has the usual kind of fiscal multiplier; each can increase and the real state of the economy. It is less measure up to any purely monetarist model yet con- favorable in the long run than it is at first. It may not 10 ceived as far as accuracy of performance is con- be ‘permanent’; but it lasts long enough for me. cerned; and each is explicit about the channels of monetary influence in a structural way. They stand Monetarists contend, on the other hand, that failure as challenges to the monetarist points of view.’tm to take into consideration the long-run price level im- plications of stabilization actions in seeking short-run As I mentioned several times, monetarists are rising output and employment objectives seriously threatens to this challenge. However, if the debate is to be economic welfare because the long run may very well resolved, post-Keynesians must be willing to examine be much shorter than usually believed. If such is the a different approach to macro-economies from their case, stabilization actions based on Keynes’ dictum, own and to consider different types of evidence, “In the long-run we are all dead,” may lead to a Some monetarists have rejected the traditional static serious loss of economic welfare for those living today. IS-LM paradigm as an adequate framework for pre- senting their views. They are investigating alterna- tives based on relative price theory. Furthermore, PRESENT STATE OF THE DEBATE they believe that explicitly dynamic analysis will be I will now conclude by summarizing the changes more useful than static analysis. Costs of information, in views regarding economic stabilization that have adjustment, and transactions play a central role in this occurred over recent years. Then, I will present my theorizing. With regard to evidence, the testing of views regarding some steps which are needed to be simple hypotheses is deemed to be mnore useful than taken if the debate is to be resolved. the building of elaborate structural models.

I believe that most observers will agree that money In conclusion, Iamheartened that progress has is now receiving more attention in economic theory, been made in recent years in delineating the main econometric model building, and stabilization policy issues of the debate and in resolving some of them. than it did just five years ago. In addition, greater Moreover, the debate is less acrimonious than earlier. consideration is given to financing considerations in It is my expectation that great strides will be made discussions regarding the influence of fiscal actions, in resolving the remaining issues in the near future.

10 tmm flobert M. Solow, Price Expectations and the Behavior of Lawrence R. Klein, “Empirical Evidence on Fiscal and the Price Level (Manchester, England Manchester Uni- Monetary Models,” in Issues in Fiscal and Monetary Policy: versity Press, 1969), p. 17. The Eclectic Economist Views The Controversy, p. 49.

This presentation and the accompanying commentary are available as Reprint No. 80.

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